Re: Misleading forecasts, helping Americans to understand the truth about world oil supply and U.S. gas supply

Dear Secretary Chu:

As concerned citizens, and representatives of the Association for the Study of Peak Oil & Gas USA (ASPO-USA), we the undersigned believe that the Department of Energy (DOE) and the Energy Information Administration (EIA) have failed to critically examine one of the most serious threats to our economy, national security, and environment—the prospect of an impending decline in world oil supply. DOE and EIA have also failed to examine factors that may constrain future domestic natural gas supply, despite the current exuberance regarding shale gas. In our view, these shortcomings to recognize and address supply limits for oil and gas are a major danger to America's economy and national security.

In sharp contrast to DOE, the Department of Defense has warned that “by 2012, surplus oil production capacity (in the world) could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day" (Joint Operating Environment, 2008, 2010). The 2007 Hard Truths About Energy report conducted by the National Petroleum Council also indicated that world oil supply faces serious challenges to meet rising global demand.

We believe that information and analysis provided by DOE and EIA has glossed over alarming trends regarding oil and gas supply, and fostered complacency about their potentially severe consequences. Without reliable information and a clear understanding of these monumental energy challenges, decisions and actions by the private and public sector are likely to be ill founded and misguided.

The Department of Energy has a key responsibility to help the nation prepare for the growing possibility of an oil supply emergency and long-term oil shortages. We believe that America needs a National Oil Emergency Response Plan and that the DOE should take a lead role in developing this plan.

To support DOE toward addressing this national challenge, we respectfully request your responses to the questions below:

Global crude oil production has departed from its historical trajectory of steady growth and remained essentially flat since 2005, despite a substantial increase in oil prices. How does DOE explain this trend, and does the change signal an impending decline in world oil supply?

The inflation-adjusted price of crude oil has increased far above its historic average and remains very high despite a worldwide economic slowdown. Again, does this development portend an impending a decline in world oil supply?

The volume of crude oil exports available to oil-importing countries has been declining since 2005, as domestic demand has increased in many exporting countries. If this trend continues, what are the implications for future oil supply, particularly for importing countries such as the United States?

In projecting future global supply and demand for oil and gas, EIA models appear to assume that supply will simply increase to match whatever level is demanded by projected economic activity? How can this assumption be justified in light of the physical, economic, and geopolitical challenges facing oil and gas supply?

In projecting future U.S. natural gas supplies, including the growing share provided by shale gas, has DOE addressed the possibility that a large share of these gas resources may require much higher natural gas prices to sustain, let alone increase, production?

Has DOE conducted a risk assessment of the consequences of EIA's oil and gas supply projections turning out to be overly optimistic?

Unconventional oil and gas resources are providing an increasing share of total U.S. supply. Has DOE assessed the economic consequences of increasing production costs and declining net energy return associated with these resources?

We would like to request a meeting, at your earliest convenience, to discuss these concerns and share our perspectives on the development of a National Oil Emergency Response Plan. Also, as you may know, ASPO-USA will hold its seventh annual conference, Peak Oil, Energy and the Economy, in Washington DC, November 2-5. Energy experts from across North America and Europe will be in attendance. We cordially invite you and/or your staff to be our guests. If you or a member of your staff wish to speak at the conference, we would be pleased to accommodate you.

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